A look into China's investigation of Foxconn

On Sunday, Chinese state media said the government has launched an investigation into Foxconn over suspected wrongdoing.

A look into China's investigation of Foxconn
A woman walks past the logo of Foxconn outside the company's building in Taipei, Taiwan November 9, 2022. REUTERS/Ann Wang/File Photo

The backstory: Hon Hai Technology Group, also known as Foxconn, is a big manufacturing company from Taiwan that's known for making Apple gadgets like iPhones and iPads. Foxconn even supplies servers for Apple's data centers. Now, back in 2019, the company’s founder, Terry Gou, stepped down from his position as chairman, and he also said goodbye to his seat on Foxconn's board in September. This is because he decided to jump into politics. But even though he handed over control of Foxconn, he still held a 12.5% ownership stake in the company.

More recently: In August, Gou announced that he's running for Taiwan's 2024 presidential elections scheduled for January. The election carries significant weight, as it's expected to impact Taiwan's relationship with mainland China. Over the past year, tensions between the two have escalated, as Beijing considers Taiwan a part of its territory.

The development: On Sunday, Chinese state media said the government has launched an investigation into Foxconn over suspected wrongdoing. The company has come out to say that it'll cooperate with Chinese authorities on this probe.

According to state media outlet Global Times, several of Foxconn's subsidiaries across China are undergoing tax audits and on-site investigations regarding land use. It's important to note that the report didn't dive into the specifics of these investigations.

Global Times mentioned that China's natural resources department is conducting on-site inspections related to land use in crucial Foxconn businesses in the provinces of Henan and Hubei. The report cites Chinese experts as saying these investigations are pretty standard and well within the bounds of legitimacy, as any company can be subject to tax inspections. In response to all this, Foxconn's shares on the Taipei stock exchange took a hit, dropping by almost 3% on Monday. 

Key comments: 

"Legal compliance everywhere we operate around the world is a fundamental principle of Hon Hai Technology Group (Foxconn)," said the company in a statement.

"It does feel like this might be a bit of a retaliation to the US sanctions," said Rachel Winter, investment partner at Killik & Co, to the BBC. “The US has imposed a lot of sanctions on China to try and limit their technological capabilities and it does feel that by going after Foxconn they will be harming Apple which is one of the US's most successful companies."